Homebuying is on the up and up, if data from the National Association of Realtors (NAR) is any indication.
Pending home sales grew by 1.6% in February, according to the NAR’s Pending Home Sales Index (PHSI), which increased to 75.6. The Midwest and South posted monthly gains in transactions while the Northeast and West recorded losses, but all four regions registered year-over-year decreases totaling a 7% drop.
"While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year," said NAR Chief Economist Lawrence Yun. "Ongoing job gains are clearly increasing demand along with more inventory."
The Northeast PHSI decreased 0.3% from last month to 63.4, a decline of 9% from February 2023. The Midwest index soared 10.6% to 81.6 in February, down 2.5% from one year ago.
The South PHSI rose 1.1% to 89.5 in February, falling 8.5% from the prior year. The West index fell 6.5% in February to 57.1, down 7.9% YOY.
“Even though mortgage rates increased in February, the supply of existing homes for sale ticked up as well,” First American Deputy Chief Economist Odeta Kushi pointed out. “Affordability constraints and still-low inventory levels will continue to dampen housing market potential. Overall, the level of sales activity remains sluggish, but the uptick in pending sales is a welcome and promising sign for the housing market.”
The fact that home prices have risen faster than household income has led to more challenges for homebuyers, said Yun, who expects inventory growth this year.
"There will be a steady rise in inventory from recent growth in home building,” he continued. “Additionally, many sellers, who delayed listing in the past two years, will begin to put their homes on the market to move to a different home that better fits their new life circumstances – such as changes in family composition, jobs, commuting patterns and retirees wanting to be closer to their grandkids."
